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E-book collusion: price war looms after court rules

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Expect a war over the cost of digital books in the coming months.

Expect a war over the cost of digital books in the coming months.

A US federal judge has approved a settlement with three major publishers in a civil antitrust case brought by the Justice Department over collusion in e-book pricing, paving the way for a war over the cost of digital books in the coming months.

Denise L. Cote, the federal judge in Manhattan who is overseeing the case, rejected arguments against the settlement, saying they were "insufficient" to deny its approval.

In April, the US government announced that it had filed a lawsuit against five publishers and Apple, accusing them of conspiring to raise the price of e-books.

Three publishers - Hachette Book Group, Simon & Schuster and HarperCollins - agreed to settle with the government, while Penguin Group USA, Macmillan and Apple declined to settle. They face a trial next summer.

The settlement approved on Thursday called for the publishers to end their contracts with Apple within one week. The publishers must also terminate contracts with e-book retailers that contain restrictions on the retailer's ability to set the price of an e-book or contain a "most favored nation" clause, which says that no other retailer is allowed to sell e-books for a lower price.

For the next two years, the settling publishers may not agree to contracts with e-book retailers that restrict the retailer's "discretion over e-book pricing," the court said. For five years, the publishers are not allowed to make contracts with retailers that includes a most favored nation clause.

Amazon, which in April called the settlement "a big win for Kindle owners" — a reference to its e-reading device — has vowed to drop prices on its e-books, probably to the $US9.99 point that it once preferred for most bestsellers and newly released e-books.

Other retailers, like Barnes & Noble, could feel pressure to respond. Barnes & Noble has spent heavily in the past several years to build its digital business in an effort to catch up to Amazon. While it has captured at least 25 per cent of the e-book market, it does not have Amazon's deep pockets and may have trouble matching discounts that Amazon can offer.

An Amazon spokesperson declined to comment on the ruling.

The court received 868 public comments responding to the settlement, including objections from the American Booksellers Association, the Authors Guild and Barnes & Noble.

The New York Times